--- title: "Adobe's last quarter revenue exceeded expectations and set a record, but the guidance is mediocre, and the longest-serving CEO will step down, dropping over 7% in after-hours trading | Earnings Report Insights" type: "News" locale: "en" url: "https://longbridge.com/en/news/278953148.md" description: "In the first fiscal quarter, Adobe's revenue increased by 12% year-on-year, and EPS exceeded expectations with an increase of nearly 20%. The annual recurring revenue (ARR) from AI priority products more than doubled year-on-year. The guidance for the second fiscal quarter did not significantly exceed analysts' expectations. Current Adobe CEO Narayen has been at the helm for eighteen years, completing two critical transformations of the company during his tenure, and will step down after determining his successor. As the commercialization path for Adobe AI is still being explored, the CEO's departure raises concerns about strategic continuity. Update" datetime: "2026-03-12T23:27:31.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/278953148.md) - [en](https://longbridge.com/en/news/278953148.md) - [zh-HK](https://longbridge.com/zh-HK/news/278953148.md) --- > Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/278953148.md) | [繁體中文](https://longbridge.com/zh-HK/news/278953148.md) # Adobe's last quarter revenue exceeded expectations and set a record, but the guidance is mediocre, and the longest-serving CEO will step down, dropping over 7% in after-hours trading | Earnings Report Insights Software giant Adobe's performance in the last fiscal quarter overall exceeded expectations, but against the backdrop of the long-serving CEO set to step down and uncertainties surrounding the commercialization path of AI, investors chose to vote with their feet. After the earnings report was released, the stock price not only failed to stop its decline but accelerated downward. On Thursday, Eastern Time on the 12th, Adobe announced that for the first fiscal quarter ending February 27, revenue grew 12% year-over-year to $6.4 billion, setting a record for the highest quarterly revenue. The adjusted earnings per share (EPS) on a non-GAAP basis also saw a double-digit year-over-year increase, exceeding analyst expectations by about 3%. The guidance provided by Adobe for the second fiscal quarter was largely in line with market expectations, bringing little "surprise." At the same time, Adobe announced that CEO Shantanu Narayen, who has served for 18 years, will officially step down once a successor is determined. This personnel change has raised deep concerns in the market about the continuity of the company's strategy and its competitiveness in the AI era. From a fundamental perspective, Adobe continues to maintain stable growth and strong cash flow, but the capital market is more concerned about whether this creative software giant can maintain the moat established over the past decade in the face of generative AI rapidly reshaping the creative software industry. The CEO, who led the establishment of the Creative Cloud platform and successfully guided Adobe through a critical transformation, is stepping down at a time when Adobe's guidance performance is mediocre and the commercialization path of AI is still being explored, which has quickly shifted market sentiment to a cautious stance. After the news broke, Adobe's stock price, which had already fallen over 1% on Thursday, saw its after-hours decline quickly expand to over 7%. The manufacturer of Photoshop software has seen its stock price drop more than 20% this year, hovering near a three-year low, and has fallen over 60% from its historical peak in 2021. Analysts believe that the sharp drop in Adobe's after-hours stock price reflects investors' view that while this quarter's performance is stable, it lacks signals that could significantly enhance long-term growth expectations, and the management change adds uncertainty to the company's future strategy. What will truly determine Adobe's future valuation is no longer traditional subscription growth, but whether the company can redefine the creative software industry in the generative AI era. ## Revenue and Profit Both Exceed Expectations, AI Product Annualized Revenue More Than Doubles Year-over-Year In the first fiscal quarter, Adobe's revenue reached $6.4 billion, approximately 1.9% higher than the average analyst expectation of $6.28 billion; the adjusted EPS was $6.06, a year-over-year increase of about 19.3%, also higher than the analyst expectation of $5.88. Net profit grew 4.4% year-over-year to $1.89 billion. In the first fiscal quarter, Adobe's total subscription revenue was $6.197 billion, with subscription revenue and the remaining performance obligations (RPO) metric for measuring future revenue growing approximately 13% year-over-year. The annualized recurring revenue (ARR) at the end of the quarter was $26.06 billion From a business perspective, the subscription revenue for Creative & Marketing Professionals was $4.39 billion, a year-on-year increase of 12%; the subscription revenue for Business Professionals & Consumers was $1.78 billion, a year-on-year increase of 16%. CEO Narayen stated in the prepared remarks for the earnings call that the ARR of AI-first products represented by Firefly has more than doubled year-on-year. He also revealed that in the first fiscal quarter, Adobe had 850 million monthly active users across platforms such as Acrobat, Creative Cloud, Express, and Firefly, a year-on-year increase of 17%, stating that this "clearly indicates that we have strong usage and a foundation for commercialization." However, the performance of Adobe Stock, which provides stock photos and media materials, fell short of management's previous expectations. David Wadhwani, President of Adobe's Creative and Productivity Business, admitted during the conference call that the impact of generative AI on the Stock business "has manifested faster than we planned," and stated that the company will focus on providing flexible options for customers between Stock and generative AI. ## Second Quarter Guidance Slightly Exceeds Expectations but Fails to Boost Market Confidence Looking ahead to the second fiscal quarter, Adobe expects revenue in the range of $6.43 billion to $6.48 billion, with adjusted EPS of $5.80 to $5.85. Analysts expect an average revenue of $6.43 billion and an average adjusted EPS of $5.70. The guidance is generally in line with Wall Street expectations and does not significantly exceed market forecasts, failing to effectively alleviate investors' concerns about the slowdown in revenue growth and intensified competition in the AI era. Jefferies analyst Brent Thill wrote in a research report prior to the earnings release, "Market sentiment is constrained by long-term AI threats, current competitive pressures, declining revenue growth, and margin pressures from AI investments." In recent years, a number of AI-native tools have rapidly emerged, such as AI image generation tools, AI design platforms, and automated creative tools. These products are challenging some functions of Adobe's traditional creative software. Analysts believe that while Adobe has a large user base, a complete creative software ecosystem, and strong cash flow, competition in the AI era emphasizes innovation speed, model capability, and ecosystem openness. This is also an important reason why investors have not been swayed by Adobe's guidance and remain cautious about Adobe's valuation. ## The Era of Current CEO's Eighteen-Year Tenure Will Come to an End Along with the earnings report, Adobe announced a significant management change: CEO Shantanu Narayen will step down after a successor is determined but will continue to serve as chairman of the board for a period to facilitate the transition Adobe announced that its board has initiated a formal succession process, with candidates including internal executives and external industry professionals. Since 2007, the CEO has driven the company, and during his tenure, Adobe's stock price has increased more than sixfold. Narayen, 62, has served as Adobe's CEO since 2007 and is one of the longest-serving and most influential leaders in Adobe's history. Under his leadership, the company fully transitioned from a software licensing model to a subscription model, completing two key transformations: - Software licensing → Cloud subscription model (Creative Cloud) - Creative software → Digital experience platform (Experience Cloud) These two strategies have helped Adobe's market value grow several times over the past decade, with the stock price increasing more than sixfold during his tenure. However, in the era of generative AI, the company is facing new industry challenges. ## CEO Departure Raises Concerns About Strategic Continuity in the AI Era Frank Calderoni, the board's lead independent director, will lead the search for Narayen's successor. He stated, "We are focused on finding the right leader for the company's next exciting growth chapter and appreciate Shantanu's continued leadership during this transition period." Emarketer analyst Grace Harmon pointed out in an email that this CEO transition at Adobe raises questions about strategic continuity, capital allocation priorities, and the pace of innovation. She noted, "Investors will closely watch whether the new leadership can maintain a balance between strict execution and active investment in AI, especially against the backdrop of increasingly fierce competition in creative and enterprise-level AI." Media reports indicate that Adobe's CEO change comes at a time when there are significant doubts about the company's competitiveness in the AI era. Several application software giants, including Salesforce and Atlassian, are also facing pressure from emerging AI competitors impacting customer growth. Adobe has been working to integrate AI tools into its creative and marketing software and has launched its own AI image generation model aimed at avoiding copyright risks, in an effort to maintain its large market share ### Related Stocks - [Adobe Inc. 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